India's urea subsidy bill may dip 43% in 4 years

India's urea subsidy bill may decline by as much as 43 per cent in the next four years on the back of a likely fall in the fertiliser prices by a whopping $300 in international markets, a report says.

Urea prices are expected to decline to around $400 per tonne by 2012 in sync with a fall in crude oil prices, a report by credit rating agency Crisil stated.

Currently, urea trades at over $700 per tonne in international markets, it adds. So, any fall in prices in global markets is likely to reduce the country's import bill.

In 2007-08, India imported about nine million tons of urea, which at current prices work out to a subsidy outflow of Rs 27,500 crore, it said.

 

"We have observed a strong co-relation between crude oil and urea prices. Crude oil prices are expected to decline sharply to around $84 per barrel by 2012. Urea prices, too, are expected to decline to around $400 per tonne...," said Crisil Research Head Sudhir Nair.

The report also pointed out that urea prices averaged $190 per tonne in the last 10 years, and $273 in the last 5 years.

Crisil also said the new investment policy, announced on August 8, would attract investments from private sector could envisage significant returns from this decline in international urea prices and a regular availability of natural gas in the domestic market.

According to the new policy, which is based on the recommendations of the Abhijit Sen committee, domestic urea manufacturers would get 85-95 per cent of the international price, subject to a band of $250-$425 dollar per tonne.